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8101.0 - Innovation and Technology Update (Newsletter), Dec 2002  
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8.1 Foreign ownership characteristics of information technology businesses

Summary

This study examined the foreign ownership characteristics of specialist Information Technology (IT) businesses in 1998-99. The results showed a strong contribution by majority foreign-owned businesses. Majority foreign-owned businesses dominate the Wholesale Trade of IT goods, both in terms of employment and income. In the Computer Services industry, they provide a similar level of employment to Australian-owned businesses, but they account for more than half the income. Foreign-owned businesses involved in the manufacture of IT goods have a similar level of employment and income as Australian-owned businesses manufacturing IT goods. However, this industry experienced significant decline between 1995-96 and 1998-99 and was a minor contributor to the IT "industry" as a whole.

Majority USA-owned businesses had the largest economic activity of foreign owned businesses to the extent that they rivalled Australian-owned businesses in terms of employment and exceeded Australian-owned businesses in terms of income.

Data sources

The study used data collected by the ABS as part of the 1998-99 Information Technology Survey, published in Information Technology, Australia (ABS Cat. no. 8126.0). Businesses in that survey were linked to the foreign ownership characteristics from the ABS Survey of International Investment for those businesses included in both surveys. For other businesses, a number of other sources were used, with most ownership data compiled from extensive Internet searches.

Scope of the Study

While the Information Technology Survey included the Telecommunications sector, this study excluded that sector because the split of data between Australian and foreign-owned would have breached ABS confidentiality requirements.

IT&T Specialists

The Information Technology Survey covers the main industries involved in the production and distribution of information technology and telecommunications (IT&T) goods and services as defined by international standards. Within these industries, there is a large subset of businesses which specialises in IT&T and which is the main focus of the statistics in Information Technology, Australia 1998-99 and therefore of this study.

Results

In 1998-99, foreign-owned businesses made a strong contribution to the economic activity of domestic IT businesses, employing nearly 54,000 (43% of all employment in IT), having IT income of $20.1b (60%), total income from all sources of $22.7b (62%) and paying wages and salaries of $3.5b (54%). By comparison, businesses which were positively identified as Australian-owned provided employment of nearly 36,000 (29%), IT income of $8.8b (26%), total income of $9.2b (25%) and wages and salaries of $1.7b (26%).

Economic activity was also undertaken by businesses for which ownership characteristics could not be determined. Such businesses accounted for 28% of employment, 14% of IT income, 13% of total income and 20% of wages and salaries. They tended to be smaller in size and it is expected that most were majority Australian-owned. The dominance of foreign-owned IT businesses would be reduced, particularly in respect of employment, if the ownership of "unknowns" were predominantly Australian.

IT income per person employed in foreign-owned businesses is higher than in Australian-owned businesses ($373,000 compared with $244,000), with the average wage/salary per person employed also following this pattern ($65,000 compared with $48,000).

Businesses with majority ownership from the USA provided almost as much employment as businesses which were specifically identified as Australian-owned (32,000 and 36,000 respectively), and derived more IT income ($10.5b and $8.8b respectively). Businesses with majority ownership from the European Union made a significant contribution across the board, providing employment of over 10,000 (8% of all employment) and deriving IT income of $4.8b (14%). Japan was the most significant contributor to the estimates from the Asian region, with businesses with Japanese majority ownership providing employment of over 8,000 (7%) and IT income of $3.9b (12%).

For more information on this study, please refer to Australian Economic Indicators (Cat. no. 1350.0), March 2002.


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